One Man's Challenge Is Another Man's Treasure - Home Building Materials, part 1 of 3

 

Solve the greater pain and reap the biggest reward. Every industry has it hardships and they come in different degrees, wearing many masks. If you figure out a way to solve these masquerading enigmas, then you may have the keys to your next successful business enterprise. This week, SourceJuice brings you its expertise on the building and construction industry through interviews, hard data and success stories. What are the problem items on builders’ line item budgets? Which hard goods construction products have the most margin? Which items do building supply houses stock and why? Exclusive details contained herein.

The Budget

The document split throughout this article is the actual budget for a home selling in the $700k range ($340k construction cost) in the Atlanta area. The problem items for builders are not just the costly ones. Framing, for instance, can vary in cost depending on the contractor or engineered lumber supplier. These are old-school builder experienced categories, they know how to work the system and categories like these should be avoided. What we are looking for in this budget are the items that traditionally have cost builders a lot because they have no power to decrease the price. "It costs what it costs... unless you buy from China." Granite requires a $100,000 saw to cut with experienced laborers, a builder will leave this alone and pay top dollar for the high end product. This brings up another point, builders have access to an abundance of labor and are not afraid to take on a few extra steps in the buying/implementing process (to save a buck).  It can be no clearer than this article, the highlighted items on this budget cause the most headaches and spend the most budget dollars.



Plumbing Fixtures – There is a lot of margin here, do your due diligence in comparing similar products. All products that look the same have varied degrees of finishing and contain different kinds of internal parts, see Sourcejuice’s Quality Rating Systems article for more information. It is still possible to resell mid-range kitchen and bath faucets for 20% profit, but companies like e-Barnett supply are highly marketed to contractors and builders. A shoe-in is the high end luxury market for plumbing fixtures. Some high end roman tub valves, like the waterfall styles, can have hundreds of percentage points in margin. Private labeling faucets is another great way to get a niche that can propel your brand above the no name brands. Sourcejuice has you covered there too: Private Labeling and Criteria for Selecting the Right Manufacturer.

Sheetrock – hard to compete with Home Depot. Home Depot has such buying power, it is only possible to beat their price by minuscule margins. The money is had here in container quantity. Don’t expect to be buying less than six containers, you need to be buying more. In addition, to make this import venture profitable you will have to research and obtain overweight permits to utilize 40ft containers, maximizing the cost efficiency of logistics.

Trim – one of the most expensive categories for builders, half labor and half materials. In addition, wholesale manufacturing companies like woodgrain Millwork (who manufacture in South America) will only sell to wholesale building supply companies. This leaves an opening for you to sell direct to the builder.  For a lot of builders/track builders, there are standard trim types used for base, crown, chair rail, etc. This makes ordering, stocking and fulfilling orders quite easy. For the luxury builders, two million construction cost, there will be many different kinds of trim, but enough to buy a whole container (or more) just for one house. A house of this caliber will utilize over $100,000 in trim.

Stair Parts – equally as good a product to import as trim. You can make this as complex or simple as you like. If you have ever seen a catalog for stair parts you will know how many pieces there are. There is a stair parts company in New York that imports over 5,000 different products, all relating to stair parts. My suggestion, stick to the basics.

Granite – if you have been reading Sourcejuice, you know by now how profitable granite can be. Point-blank, buy it prefabricated at $11 and sell it at $30.  More details in Sourcejuice articles:
•    Share Your Expertise: David Anderson on the China Granite Industry
•    Prefabricated Granite Import Guide
•    Digging Deeper Series: Actual Landed Costs Examined

Kitchen Cabinetry – go modular and read Sourcejuice article Beware of the Middleman and Seek the Intermediary.

Stay Tuned for part 2 in this series, your treasure map to the building industry.


dylan@sourcejuice.com // Dylan Blankenship